Definition

The term retail investor refers to an individual that purchases or sells securities on behalf of their personal account. Unlike institutional investors, retail investors do not provide financial services to customers.

Explanation

Also referred to as retail traders and individual investors, a retail investor buys or sells securities from their personal account. Unlike institutional investors, retail investors do not pool assets or trade on behalf of others. They are also less influential than institutional investors when it comes to the company's decision making process.

Finally, since the value of their trades is relatively small, retail investors oftentimes pay much higher commissions than institutional investors in terms of their fee to trade value ratio.